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Quality commercial spaces seen leading property market recovery

By Nikos Roussanoglou

The category of high-standard commercial properties will be the first to post a rebound in the local real estate market, according to a Bank of Greece report on monetary policy published earlier this week. It also notes that the prices of such properties are expected to stop declining this year thanks to the revival of investment interest in income properties as a result of the improvement in the business climate as well as confidence.

In terms of demand, the greatest interest is to be found in tourism/hotel properties, as well as the market section of leased office space and high-standard stores. The BoG notes that there is also investment interest in large, modern logistics spaces.

The report estimates that the prices of lower-league commercial properties will continue to fall over the next few quarters. A gradual recovery is expected from next year, provided that no unforeseeable circumstances arise, such as political instability.

It is worth noting that there is only a handful of quality commercial properties available that would fulfill buyers’ requirements. After all, combined with the absence of bank funding, the dramatic decline in rental rates and demand in previous years has led to something of a freeze in new commercial property development.

In 2013 alone rental and acquisition rates declined by 16.3 percent and 16.9 percent on average year-on-year. Now the Bank of Greece report estimates that the stock of high-standard commercial properties will show a gradual rebound in the medium term, as property development companies attempt to cover part of today’s demand and will need to boost the existing supply.

Other reasons that lead investors to back out of putting their money in the market are the difficulties and legal obstacles that arise from the institutional framework, such as town-planning and land usage legislation, as well as some owners’ unrealistic financial demands.

Demand is often discouraged by the bureaucracy that dominates the Greek real estate market, along with a lack of clarity in town-planning regulations and the nonexistence of a complete and precise land register, the BoG report concludes.